This application is based on the hypothesis that the determination and differentiation of chondrocytes during embryonic development is controlled by a multistep developmental pathway in which specific transcription factors play a critical role. This application proposes to study two different steps in this pathway. The applicants have recently identified the DNA for a novel homeodomain containing protein, Cartl, which is selectively expressed in prechondrocytes and chondrocytes and have speculated, based on the tissue distribution of Cartl transcripts, that Cartl plays a role as a transcription factor in the pathway of chondrocytes determination and differentiation, probably at an early step. The first part of this proposal is to characterize the function of Cartl in intact mice and embryos by generating mice that are deficient in Cartl and to study in transgenic mice the transcriptional mechanisms which control the expression of the Cartl gene in prechondrocytes and chondrocytes. The second part of the application is based on the hypothesis that another chondrocyte-specific transcription factor controls the activation of the gene for proa1(II) collagen, a typical marker of terminal differentiation of mature chondrocytes. The investigators propose to define the minimal sequence in intron 1 of the COL2A1 gene which confers chondrocyte-restricted expression to a B-galactosidase reporter gene in transgenic mice and embryos, to characterize chondrocyte-specific proteins which bind to this minimal functionally active sequence and to clone their cDNAs. This application is a two- pronged approach to studying two different steps in the pathway of chondrocyte determination and differentiation.